The difference between the expected +0.1% growth and the surprise -0.2% contraction is pretty tiny. But that's just saying that the economy would have been pretty dire even if we HAD avoided a second recession on a technicality.

This is NOT the outcome we wanted. We should admit that and ask what we could do better.

The Chancer of the Exchequer, Master Gideon Oboe – henceforth to be known as the Double-Dipsh— no, I can't say that! – has already had a BAD MONTH because of the Budget, because actually it DID slap more taxes on the rich and the very, very rich and they've been finding all sorts of ways to whinge about it.

It's funny how we're told to cut less and tax a little more right up to the point where we DO that and then it's pasty-tax this and conservatory-tax that and cathedral-tax the other.

(And it's REALLY helpful when you can get CHARITIES to front up your demands for tax loopholes. Of course, some people might say that if you need a tax break in order to give money to charity, you don't deserve to call yourself a philanthropist. Even if the charity in question is the Birmingham Opera Company, who I am sure bring great joy to the least well-off through their Pas des Deux-es.

(Look, with charity donations, like PENSION CONTRIBUTIONS, there's a case for saying that they come out of your BEFORE-TAX income, fair enough. So if I've been persuaded by the Party that the amount you put in your pension should have a cap, then it seems only CONSISTENT that they should say the same for the charity giving.)

In part the badness of the news is PSYCHOLOGICAL: just the WORD "recession" is enough to dent confidence and slow our chances of growth and recovery.

OF COURSE it hurts POLITICALLY. It lets Hard Labour weep their crocodile tears and crow about "wrong choices".

But we should not let that put us off taking a SERIOUS look at our choices and reassessing whether they ARE bad or not.

And you KNOW how much I HATE it when Ms Nadine "Mad Nad" Dories might have a POINT.

But "remorse, contrition and compassion" are EXACTLY the qualities that we should be showing. They are what I had HOPED would make the difference between this administration and the governments of Queen Maggie and Mr Major-Minor.

Why isn't it working?

The predictions of growth that have repeatedly proved so over-optimistic are based on the way that the economy – nationally and globally – has bounced back from previous recent recessions (1972, 1980, 1991, 2001). But in some ways, the REASON for those bounce-backs was CAUSE of this recession: we were pouring on more of the old problem, racking up ever-more DEBT.

The Bank of England relaxed lending laws at the start of the Seventies, triggering a house price boom that helped us over the Oil Shock; our own North Sea Oil, i.e. the flogging off a previously-undiscovered asset, reducing the Nation's net savings, rescued us from the early-Eighties recession; leaving the EMU and the subsequent devaluation and inflation lifted us out of the Nineties property crash, again at the expense of a lot of National wealth, and of course a huge burst of cheap borrowing forestalled the dot.com collapse in the early Two-Thousands.

This time around, it's that very borrowing that has finally caught up with us and CAUSED the crash. We can't at the same time take the action to stop it happening again AND let it happen again to get us out of the hole.

Essentially, we've been storing this cataclysm up for four decades, and the models really aren't ready for it.

Another big drag on growth is the renewed (or never-went-away) CREDIT CRUNCH.

I've said before, many times, how if you lend more money it has a magical multiplying effect that boosts economic growth; and that if you reduce lending then it reverses the process, sucking growth right back out again.

The banks are having to build up much bigger reserves against losses to meet the new regulations that the Coalition have put on them. In simple terms, this means they need more money IN and not as much OUT.

It's why, for example, the Halifax-that-we-own have raised their mortgage interest rate even though the base rate remains frozen at an all-time low. They're gouging an extra margin from borrowers to build their own balance sheet. But at the same time cutting people's spending power, taking money AWAY from activity that could help growth.

It's the same problem that we had with the VAT rise last year – money is burnt up in interest (or tax) instead of being spent on making things.

Thirdly, there is the simple factor of TIME. Almost ALL of the levers that Gideon the Chancer can pull take a VERY long time to affect the economy. There's a BIG rise in the personal allowance coming in – it's been announced for ages but it's only going to go into your pay packet this month. Too late for the first quarter growth figures. The EVEN BIGGER tax cut announced in this year's budget won't get to you until NEXT year.

That VAT rise last year had a big impact, pumping up inflation, and it's only a year later that the inflation figure is starting to come down (subject to the ongoing energy crisis and soaring food prices). Once you've done something like that it's TOO LATE to change your mind. Sure, you can chop and change the VAT rate all the time, as Labour propose, but that causes no end of problems and costs for businesses who have to reprint all their price lists and reprogram all their accounting software.

In a way, it ought to be impossible to blame the Coalition… YET. Because the cuts have barely started. We hardly cut at all in 2010, and 2011 was merely the beginning. Except for the VAT rise, really, the impact has not yet arrived.

The most terrifying aspect of this though is that most of the cuts are STILL TO COME. The plan is, as it always was, to keep spending the SAME in cash, and allow inflation to do all the dirty work. Then any real growth above inflation would give the Coalition more room to manoeuver, slackening off on the spending controls, reducing the bite of the extra taxes. But the growth hasn't arrived. So the screws continue to tighten.

Could Hard Labour have been RIGHT?

Well, there IS always that possibility. But I still don't think so.

Hard Labour's solution was – and still is – more stimulus, paid for by more borrowing, to try and kick-start the economy. They'll point to Americaland where President Barry O DID do more stimulus (spending coupled with a package of tax cuts) and the outcome appears to be an economy that might just come good in time for his November re-election.

(Of course that is SIMPLISTIC – the US economy has a different economic mix, with more manufacturing and much less finance and they are much less closely tied to Europe, but on the other fluffy foot have much, much worse borrowing to start with – but it's a crude enough comparison to be worth considering.)

The American example shows that more stimulus COULD have worked.

What it doesn't show is that it WOULD have worked.

If a patient has a massive heart attack, you can get them back on their feet with a massive injection of adrenaline.

They'll bounce up and run around for a bit at first, but of course IT WILL KILL THEM.

And in a lot of ways this is exactly what Mr Alistair Dalek DID do with his VAT cut and Quantum of Easing. He injected the economy with a massive dose of cheap money and the so-called growth was bought, almost literally pound for pound, by borrowing it from the future.

Hard Labour's MASSIVE ECONOMIC GAMBLE was – or would have been – to KEEP pumping borrowed growth into the economy in the hope that a genuine recovery would come along in time to save them.

Essentially, keep the patient running around and keep your fingers crossed that their heart starts again on its own before they DIE.

The PROBLEM with this approach – and it's a FUNDAMENTAL problem – is that all you've done (so far) is create a massive PONZI scheme: you are generating growth at the front door but only by pumping in borrowed money at the back door.

What is ABSOLUTELY ESSENTIAL is that once you HAVE got an economy that looks like it's growing is THEN you do the HARD WORK to fix the broken bits of your system: cut your spending; run a huge budget surplus to repay your borrowing; rebalance your economy in favour of wealth-generating and away from government spending.

And based on their history there is NO EVIDENCE that Hard Labour would be willing to DO that work. They would just repeat the DISASTER of their last government and fund a spending binge on the never-never.

(There's also a secondary problem with Labour's methods – to be effective, you need to give your stimulus of borrowed money to the PRIVATE SECTOR, to manufacturing, construction, mining or farming – including wind farming. Basically, things that GENERATE more cash than you put in. It's called INVESTMENT. The evidence shows that what Hard Labour's SPIN MACHINE calls "investment" actually means spending the money on more public sector workers instead. That may result in a better society in the long run, but it doesn't solve the immediate problem and arguably makes it worse in the short term by adding more costs to other already-hard-pressed workers.)

Whether the gamble succeeds or fails depends on how long people can be persuaded to keep lending you the money.

If you're lucky then you get away with it. Enough growth in genuine economic activity – not just recirculating government money – and you can pay for the extra borrowing to cover you through the "actually fixing the economy" phase.

But if you're unlucky, if the manufacturing and service sectors don't come up with the goods before it becomes too expensive for you to carry on borrowing, then never mind GREECE... the next stop for the economy is YEMEN.

On coming into power, in the climate of turmoil on the money markets, on seeing the Treasury's books, on receiving the infamous "there's no money left" note from Liam Byrne, with the spectre of a potential Greek collapse hanging over us... all of these factors persuaded the incoming Coalition that the time before the borrowing dried up was LESS rather than MORE, and that the chances of the GAMBLE paying off were not worth the risk.

Does that mean that we missed the chance of a short cut out of the pain of a trashed economy?

Yes, it does.

But we ALSO avoided the downside risk of a toxic combination of spiralling national debt, escalating interest rates, out-of-control inflation and STILL no growth – the kind of mix that's destroying the Eurozone at the moment.

Yes we "only" added a hundred and twenty six billion squids to the national debt last year. But that's eleven billion squids fewer than in the year before, despite rising inflation. The gap is closing.

And the pound continues to STRENGTHEN against the DOLLAR and the EURO, showing that the markets believe our economy is SAFER and STRONGER than either the Americaland or the Euroland economies, in spite of growth over there while we're still bouncing along the fluffy bottom. People want to invest their money HERE, and that's a good thing.

What should we DO about it?

Well step one is DON'T PANIC!

Own up to the fact we've NOT solved the problems of the economy yet. They were pretty massive but we thought we could do it. We SAID we could do it. But (at least so far) we HAVEN'T.

But that's NOT a reason to flail about wildly adopting "Plan B", "Plan C" or "Plan 9 from Outer Spads" at random.

We should look at what we ARE doing. Does it look RIGHT? If not, can we fix that? Who is being hit hardest? Is that fair? Can they take the cost? Can we give more help to those in need?

In this immediate set of figures, it appears that the driver of this contraction is the construction industry. And this is ANNOYING because it's one place where the government COULD reasonably borrow to invest: buying new home building and road and rail infrastructure NOW helps keep builders in employment AND prepares the way for when the recovery comes. And the assets that they build can return an "economic rent" – if they're houses a literal rent – that covers the cost of borrowing so it DOESN'T damage the economy.

And to be fair the Coalition ARE doing SOME of this. But clearly not enough and/or not quickly enough.

Planning laws and general NIMBY-ism are a real brake on bringing forward these projects. Obviously High Speed 2 is going to take a geological aeon before it breaks ground, but just think of all the objections to new windmills or new housing estates, too. Having said that, I bet you most MPs could name one or two "off the shelf" projects in their constituency just waiting for funding – that's a place we should be looking to nudge a bit harder.

Less construction isn't the whole of the story. There's just not any growth in any other areas to make up for it either. Remember Mr Dr Vince's leaked letter – we need to sharpen our strategy for growth, boost investment and back Britain.

Unclenching the credit crunch is going to be necessary if not vital. Captain Clegg made a speech about access to finance today.

But we also need a revival of OPTIMISM.

It's not all bad news. The rise in commodity prices means that some things that were not economically viable before now look profitable. That's what happened with North Sea Oil in the Seventies. This provides new OPPORTUNITIES. Some of them are GOOD (like mining space asteroids); some of them are, er, NOT SO GOOD (like Fracking Blackpool).

But what is KEY is that people are now starting to CONSIDER these opportunities.

People are willing to make PLANS – however outrageous or barmy they may seem.

THAT is what's needed for recovery, the start of the upswing, a sign of hope.
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Monday, April 23, 2012

Surprisingly, the answer is NOT "when it's AJAR" because it's actually the OPPOSITE of ajar, it's a DELAYING TACTIC designed to hold the door to democracy CLOSED just that little bit longer.

The people who are AGAINST a democratically elected House of Lords KNOW that no one in their right minds would vote "NO" to Lords reform. So it is CLEAR that they are angling to SHIFT the debate OFF the simple, central fact: "if you're going to make laws over me I have a RIGHT to a say in whether your fluffy bottom gets a shiny red seat!"

We can ALREADY get a FLAVOUR of the sort of "NO" campaign that the anti-democrats want to run from the murmurings on the WEIRDER wings of the Conservatory Party. They want to portray it as PR by the "backdoor", a "sneaky" rerun of the AV choice that they claim was "already rejected". It was NOT. Mr Mark Reckons punctures these LIES.

NO ONE voted to reject a proportional system, 'cos AV ain't proportional, and the "No" campaign SAID SO last year.

You can bet your last bean that having FORCED a public vote, they will then play the "this is an EXPENSIVE WASTE of time when there are more important things to do" card that worked so well for them in their vicious and deceitful anti-AV propaganda.

The TRUTH is that there is NOTHING more important than sorting out HOW we make the decisions about running the county. It doesn't matter whether you think that the most important thing is HEALTH or EDUCATION or TAX or FOREIGN POLICY or POLICE or PUBLIC NUDITY – the decisions about how to deal with ALL of those are made by the people we elect. Or in the case of the House of Lords Club, the people we DON'T elect! Which means getting how we elect them right has to be sorted FIRST.

The UNGODLY alliance between the WACKY-WING of the Tories and the closet-conservative REACTIONARIES in the Hard Labour party is based on their old fashioned sense of ENTITLEMENT.

They just cannot get over the idea that PEOPLE have a RIGHT to say how they are governed. That the "social contract" between people and government has OBLIGATIONS on THEIR side too.

They don't like the COALITION because it's an example of how Governments ought to work: messy, certainly, but with policies being argued out IN PUBLIC and with the public able to see what's being decided.

And they don't like the idea of an ELECTED House of Lords because it's the last bastion of "we know better than you" against actually having to do what their BOSSES, you me and everyone else in Great Britain, actually tell them to do!

Mr Milipede – presumably as part of an ongoing bid to plagiarise EVERY television comedy going – calls this sort of government an "OMNI-SHAMBLES" because policies are being found wanting and rejected.

I guess Mr Milipede preferred the "good old days" of New Labour when policies would go wrong, but the Government would use their massive, gerrymandered majority to RAM THEM THROUGH ANYWAY.

Oh yes, how well we remember those TRIUMPHS of STRONG government: the 10p Tax debacle; the NHS database bully-balls-up; the almost entirely circular education policy that abolished one sort of academy before creating another; the classic I.D.iot card exercise in burning money; or everybody's favourite, the murderous and illegal invasion of a country that was no threat to us at all based on a LIE by the Prime Monster.

The word "OMNI-SHAMBLES" – lest Mr Milipede forget – is uttered by a character widely believed to be NOT-IN-ANY-WAY based on Mr Alistair Henchman of Dodgy Dossier infamy.

If THAT's "strong government" I'm all in FAVOUR of a House of Lords with a bit more MANDATE to say "not in our name!"

The case for an ELECTED House of Lords, and for a PROPORTIONALLY ELECTED elected House of Lords, is pretty much UNANSWERABLE. So much so that ALL the Parties elected to the House of Commons said that's what they would do at the last election.

An appointed chamber means PATRONAGE. It means CRONYISM. There is NO SUCH THING as an "independent" appointments commission – shame on you, Lord Steel – someone is ALWAYS going to "know someone". Being a "close personal friend" of the Prime Monster – or the "independent" head of the commission – is not a better reason for getting a free pass into the legislature than your great-great granny being a "close personal friend" of the monarch.

We're told we will lose an "expert" house. Well expertise can be highly overrated. You may be a brilliant neurosurgeon, but how many days of the week is the House of Lords legislating on neurosurgery, eh? We want brilliant GENERALISTS, not brilliant SPECIALISTS. Saying you're a great expert in ONE field is as good as saying you're as IGNORANT as the rest of us ABOUT ALMOST EVERYTHING ELSE!

But fine, if you believe that your expertise makes you better qualified to make laws, go right ahead and use it as one of your selling point when you STAND FOR ELECTION. If you're right, it will help you win.

It seems ASTONISHING that people who CLAIM to be defending "the way that these things work" seem so anxious to RIDE ROUGHSHOD over, well, the way these things work. Surely it's difficult to defend the status quo of an unwritten constitution when you keep MAKING IT UP as you go along!
And that they now want to waste MILLIONS of POUNDS of YOUR money, charging you for the PRIVILEGE of having a say over whether you should have a say... it beggars belief as well as the exchequer.

Let's just accept that it's the TWENTY-FIRST CENTURY now and probably time to move on from an EIGHTEENTH CENTAURY Parliament. You were ALL elected on a manifesto pledge to do this, so pass the bill and let's get on and elect ALL* the people who make our laws.

Monday, April 16, 2012

Please, please, please read this GOLDEN posting from Mr Dave and then take the time to write – POLITELY – to the FCC (conferenceinformation@libdems.org.uk) about their BLITHERING proposals to let the POLICE decide who can come to OUR Conference.

Please remind them that we're the Liberal DEMOCRATS and not the "Liberal DO-WHAT-THE-FUZZ-SAYS-OCATS".

The most important concern is that this is clearly an unwarranted constraint on the right of Party members to attend and participate in conference. The ability of the police to deny access to the democratic process – no matter what safeguards and party committees are required to give their approval – is illiberal.

If the police wish to stop you voting in a General Election, they are required to arrest you, and convict you by presenting evidence to a court. The proposals outlined by Andrew in his piece make no mention of whether the member in question will even be informed that the police have raised an objection, much less afforded the right to make a defence, which is clearly against natural justice.

We should be opposing this, not making it a part of our processes.

Second there is the question of intrusion. It is in the nature of state bureaucracies to gather more data simply because they can. I note, appalled, that it is necessary to "insist" on data being deleted after it is used. The routine assumption being that the police are entitled to keep data on private citizens once they have gathered it, just because! Again, we ought to resist this on principle. And on top of the general point, there are particular issues concerning the privacy of some LGBT+ members that are really not properly addressed by the proposals. As the Party that would like to think of ourselves as the most inclusive and welcoming, are we really happy to be seen closing the door to an important community?

Thirdly, but perhaps most likely to carry you, it seems that this proposal would be expensive and counter-productive, diverting limited police resources into performing background checks and away from measures that might have a measurable effect on the security of the conference. The examples Andrew listed in his piece as given by the police – the Brighton bombing and the Norwegian gunman – were both committed by individuals who were not registered for the conference and would therefore not have been prevented by any background check. Indeed, I should be grateful to know if accreditation has prevented any terrorist attack. Has any terrorist ever registered for the event which they intended to attack? Were they picked up by a review of their past associations?

I am highly concerned that the purpose of accreditation is to give the impression of security while not actually making anyone any safer. And indeed, by diverting resources, actually making the conference less safe.

Fourthly, I am sure that I do not need to remind you that conference passed a motion at Birmingham that specifically said:

"Conference therefore calls upon... The Party President to ensure that conference arrangements respect Article 6 of the federal constitution which provides that Local Parties elect representatives and that no other body within or without the party has the power to exclude in advance their attendance at conference."

To summarise: the proposal for conference accreditation is illiberal, anti-democratic, intrusive, unlikely to deliver any increase in security and quite possibly dangerously wasteful of police time and money and against the Party Constitution and the express will of Federal Conference.

"Hands up who in benefits from the 50p tax cut," demanded Mr Milipede in the Budget debate. Repeatedly*. "Come on come on own up who's been naughty then," he could have added, since he was already behaving like the milk monitor in the reception class.

Of course he was taking advantage of PARLIAMENTARY ETIQUETTE that meant that none of them could reply, knowing that the CAMERAS would show them having to sit there like a bunch of LEMONS.

The simple answer, though, ought to have been: "NONE OF THEM", since the Coalition Cabinet took a pay CUT on entering office so that they, unlike when Mr Milipede was in the Cabinet, do not earn more than £150,000 for their duties. And since Mr Balloon also banned Cabinet ministers from moonlighting that ought to be ALL they earn.

(OK, possibly NOT what with trust funds, investment income, property portfolios and all the other ways for WEALTH to make money...**)

But a somewhat overlooked fact is that Cabinet ministers are actually WORSE OFF because of the changes in allowances and thresholds. Remember that "withdrawal of personal allowance" that Daddy keeps going on about? Well, because they earn more than a hundred thousand squids, that affects the Cabinet. So, they DON'T gain from the increased personal allowance that takes millions out of tax, but they DO have to pay more of their income at the 40% rate because of the reduced 40% threshold.

The changes mean that they will be paying more than a grand MORE in tax next year than they were when the Coalition formed in 2010.

The net effect of the tax changes mean that it's actually people earning more than a hundred and fifty AND eight-and-a-half thousand squids actually get a tax cut.

So you would have to be earning TWENTY-FOUR GRAND ON TOP of your Cabinet salary (not fifteen, as the Grauniad thinks) in order to benefit from the upper rate cut from 50p to 45p.

Yes, I'm SURE that your heart BLEEDS for them; it's not EXACTLY like they'll be short of sticky buns.
But it IS worth remembering this whenever Hard Labour are bleating about "Do you benefit personally"; a fair reply would be: "No, and we're paying more than YOU did!"

*Actually, speaking of people who repeat the same line over and over without listening to the reply, Ms Rachel Reeves – robotic Shadow to Mr Danny – likes to bang on over and over that reducing the 50p rate to, er, a higher tax rate than Hard Labour had for all but FOUR of the SIX-HUNDRED and SEVENTY-NINE weeks that they were in government, amounts to an "average tax cut of ten thousand pounds".

How do you get "an average of ten thousand pounds"? Well, there are three hundred thousand people in the 50p-as-was bracket, so you take three billion squids and divide that by three hundred thousand.

Hang on, where did those three billion squids come from? That's half a billion squids MORE than even the two-and-a-half billion that Hard Labour claimed would be raised by the 50p rate. (Or THIRTY times more than the hundred million squids that the figures checked by the Office for Budget Responsibility agree that the upper rate ACTUALLY raised.) How is this MATHEMATICALLY possible?

After all, she could not have just MADE UP a big-sounding number, could she?

**Actually, this manages to get oh so close to an important point while still managing to miss it entirely.

Mind you, Mr Milipede does like to BLUR the difference between BEING a millionaire – which means HAVING a million squids – and EARNING a million pounds a year which makes you a CONSIDERABLY FATTER cat-monster.

(Certainly, we'd none of us say "no" to having a million squids... unless they were ACTUAL squids... ew! But the days when a million pounds could buy you a "millionaire lifestyle" are in the past. You'd be MODESTLY but not LAVISHLY well off for the rest of your life – you don't get much that interest at the moment, but the capital at least would last forty years if you gave yourself the equivalent of the average salary. In fact, thanks to the house price boom, a lot of people, especially in the south-east, are millionaires on paper without having a lot of ready cash for buying champagne and yachts.)

But if you are REALLY WEALTHY then it's quite possible to arrange your affairs so that you only get a SMALL INCOME. If you've got pots of cash, then there are all sorts of SAVINGS you can make – you don't need to pay for a MORTGAGE 'cos you can just buy a house with capital; you don't need to pay into a pension 'cos you've got a tidy pot already; you don't have to pay a fortune for a ticket for your daily commute 'cos you don't actually have to have a job; and so on.

So it's is a whole lot more complicated that JUST knowing what someone's "taxable earnings" are OR knowing that on paper they're worth "a million". To see the WHOLE PICTURE you need to have an idea of their earnings AND their total WEALTH (and probably the WEALTH of their immediate family, like spouses, parents, children, that great aunt of a distant cousin who just happens to let them live in her castle and fly about in her plane etc).

People who are PAID millions of squids are at least DOING SOMETHING (even if you cannot credit that they actually EARN a salary larger than the GDP of a small country***!). People who just SIT on piles of cash are actually WORSE 'cos they're not just not contributing to the country, but their wealth is actually locked away from the economy when it could be being invested.

That is why shifting tax from INCOME to WEALTH actually MAKES SENSE.

Though of course Liberal Democrats prefer to pass the tax cut on to the millions at the bottom end, rather than the Conservatories preference for giving a bung to a few chaps in the city City.

***Actually****, the country with the smallest GDP is Tuvalu, with a GDP of thirty-six million dollars, which is still more than Bingo Bob Diamond of Barclays gets paid. Shush, don't tell him.

****Too many "actuallys".

PS:

*+*Actually, not the Treasury, but Her Maj's Revenue and Customs, thanks to Hon Lady Mark for correction. Arrgh "actually" overload!!!!!
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Monday, April 02, 2012

Leaks to the press say that the government – NB: authoritarian idiot branch (note to Cap’n Clegg: please ensure this is confined to Conservatory rabble) – are proposing to “maintain” our security forces' ability to fight baddies (or indeed anyone they think is looking at them funny) by MASSIVELY INCREASING the scale and scope of their powers.

Simple solution, Cap’n Clegg NEEDS to make a statement: “This is the Conservatories FLYING A KITE. You know as well as I do that I and my Party aren't going to put up with this sort of STUFF AND NONSENSE. Case closed.”

We are NOT in a competition to see who can be the most “not quite as EVIL as Hard Labour”.

We are the FLUFFING LIBERAL PARTY. We ROLL BACK this kind of thing; we do NOT ROLL OVER for it!